Chapter 96 Question 086

Why do lawyers spend more on cars and clothes than college professors with the same income? The more money people earn, the more willing they are to spend on most consumer goods.Cars and clothes are no exception. Rich people spend more on clothes and cars than poor people.But income is not the only determinant of such spending.For example, lawyers spend more on clothes and cars than college professors, assuming similar incomes and tastes.Why is there this difference? As mentioned earlier, there is a direct relationship between how much people earn and how much they spend.People's abilities are also directly proportional to their salaries in a competitive labor market.Taken together, the above relationships imply that there is a direct relationship between how talented people are and how much they spend on cars and clothes.So, we can roughly guess a person's talent based on what kind of clothes he wears or what kind of car he drives.

This guess is more accurate in some occupations than in others.For example, talented lawyers are in high demand and charge high fees; and the most talented professors tend to earn more than their less able colleagues.Judging the level of potential ability of the other party based on what clothes they wear and what kind of car they drive is more accurate for lawyers than for professors.If a client wants to hire a seasoned lawyer, there must be a pretty good reason to say no to a guy who drives a rusty, ten-year-old Chevrolet.Conversely, if a chemistry professor drives the same car, students have no reason to doubt his ability.

If the type of car a lawyer drives is any indication of competence to a potential client, the lawyer will surely spend more on the car to take advantage of the signal's implications.As long as lawyers compete in this spending race, on average, the most capable lawyers will still drive the most expensive cars.But there are also many people who will spend more than expected on cars because of this.In short, lawyers are under more pressure on cars and apparel because it is too costly for them if clients misunderstand their capabilities because of these signals.A lawyer who fails to match his colleagues' spending levels will appear less capable than he really is, just as a dog who fails to puff up its hair in a fight will appear smaller than it really is.

Conversely, the professional achievements that professors value most are not easier to achieve because they spend more money on clothes or cars.Professors hope that their papers will be published in top academic journals, and they hope that the topics they are researching will receive funding.But the people responsible for making the above decisions generally don't care what kind of clothes the professor wears and what kind of car he drives.